I have often written on these pages about Microsoft’s turnaround with Xbox One. From a disappointing launch window, the console and surrounding ecosystem has thrived. Microsoft’s bold market choices have led to Xbox One becoming a sales hit. According to market research firm NPD, the console is having a record year in terms of sales.

In its latest report, the company says Xbox One is growing this year and is likely to break the highest time-aligned annual growth rate for any console since 2010. Eight years ago, it was the Xbox 360 that achieved the largest growth. In isolation, this means the Xbox One is on course to be the biggest growing console ever.

That’s interesting when you know where the device has come from. I have discussed at length in other reports the mess Microsoft made of launching the console in 2013. To cut a long story short, the company wanted the Xbox One to be an entertainment hub while gamers just wanted a gaming machine.

Plenty of decisions, such as attempting to lock gamers down with strict DRM rules or forcing Kinect on consumers at a $100 cost, were derided. Microsoft seemingly learned from those mistakes. Over the last three years the company has done plenty right in terms of hardware and software moves. From the Xbox One X to making Minecraft a cross-platform experience, Microsoft has been innovating on console.

Industry Success

While Microsoft has hit plenty of home runs in recent years, the company’s console rivals are also on winning streaks. The poor early performance of the Xbox One allowed Sony to steal a march on the 8th generation of the consoles market. PlayStation 4 sales eclipsed Xbox One shipments early and never looked back.

I have often written that the first two years (2013-2015) ensured the PS4 would win this generation in terms of pure sales. That has played out in the following years as PS4 sales have not slowed as Xbox sales increased. In other words, there is room at the table for both companies.

NPD highlights this by pointing out the PS4 is this years’ leading console in terms of units sold and dollars earned. I could argue Microsoft will not care too much about this.

As long as Xbox sells healthily, does it really matter how well PS4 does? It’s an interesting question and we have seen in the smartphone market how two companies (Apple/Samsung) can be rivals but also thrive.

If there is room for Sony and Microsoft at the table, Nintendo has also insisted in grabbing a seat. After the failure of the Wii U, the company is back in the mix with the Nintendo Switch. The newest hardware in this generation is also thriving and in fact, NPD predicts it will end the year as the leading console seller.

Software Effect

The gaming market is up 15 percent compared to the same time last year. Hardware sales increased 15 percent, software 7 percent, and Accessories & Game Cards 29 percent. The big question is why this is happening?

Some of that game card growth can be attributed to cryptocurrency mining, but an increase in headset sales and console demand points to a game that has changed the market in 2018… Fortnite.

Epic Games’ free online third-person shooter has been a media success the likes to which has rarely been seen. Millions of users play the game and it is the sort of cultural phenomenon that crosses demographics.

However, Fortnite is certainly not the only software juggernaut this year. NPD Group says 2018 has been the best year in over a decade in terms of big titles.

Predictions

NPD Group has made predictions for the remainder of the year in the gaming market:

  • In a very tight race, Red Dead Redemption 2 will edge out Call of Duty: Black Ops 4 to be both the best-selling game of Q4, and 2018’s best-selling game of the year.  Battlefield V, NBA 2K19 and Far Cry 5 will round out the year’s top 5 best-sellers list:
  • Driven by the launches of Pokémon: Let’s Go, Pikachu!, Pokemon: Let’s Go, Eevee! and Super Smash Bros. Ultimate, Nintendo Switch will be the best-selling console of the fourth quarter in unit sales, while also elevating the platform to be the best-selling console of the year.
  • By year’s end, the time aligned installed base of the PlayStation 4 and Xbox One will exceed that of the PlayStation 2 and Xbox by 6 percent and will be ahead of the PlayStation 3 and Xbox 360 by at least 30 percent.
  • All three current generation consoles will each generate at least 4m units sold in 2018.  Total 2018 hardware sales across all console and portable platforms should exceed 17.5m units, the highest total achieved in the U.S. market since 2012.
  • Headset and gamepad sales will continue to show very strong growth rates through the rest of 2018, with high double-digit growth shown in the fourth quarter for both accessory types.
  • Physical video game title release count will exceed 400 unique titles, finishing the year up at least 15 percent when compared to 2017.
  • Physical video game software dollar sales will finish the year with growth of at least 8 percent when compared to a year ago, while digital full-game sales will continue to grow at double digit percentage rates.